D.C. Council members watered down their own earmark rules as they developed and ultimately approved the fiscal 2009 budget, creating a loophole that allowed six nonexistent nonprofits linked to Councilman Marion Barry to snag $450,000 in taxpayer funds.
The entities, tied to Barry’s office in published accounts, received $75,000 each through the 2009 Budget Support Act, which earned final approval in July 2008. But none of the organizations was incorporated until Oct. 29 — 28 days after the fiscal year began. It is unclear whether any operated before that date.
In the summer of 2008, the council voted to allow nonprofits to receive city money without producing incorporation papers. That appears to have opened the door for the nonexistent non-profits to qualify for taxpayer cash.
“You can’t always legislate against people being able to manipulate a process to engage in wrongdoing,” Ward 3 Councilwoman Mary Cheh said Tuesday. “No one anticipated using the process to make up organizations on the fly.”
But former Councilwoman Carol Schwartz voted against loosening the requirements last year. “I fought a very lonely battle for a very long time, and my very greatest fears are now being realized,” Schwartz said.
The earmarks in question went to Ward 8 Clean & Sober, Ward 8 Clean & Green, the Ward 8 Youth Leadership Council, the Ward 8 Education Council, the Ward 8 Health Council and the Ward 8 Workforce Development Council. Those same organizations are slated to receive another $575,000 in fiscal 2010.
The grants are the subject of inquiries by D.C. Auditor Deborah Nichols and council pro bono investigator Robert Bennett. At-large Councilman David Catania on Monday called on the inspector general to take up the matter as well.
An article in the City Paper alleged that all six nonprofits were incorporated by Barry’s staff, possibly through forgery. Barry aides also are alleged to have administered the grants and managed the nonprofits behind the scenes.
The accusations are a “lie,” Barry said this week.
To receive 2009 earmark dollars, the council initially required that each recipient submit its articles of incorporation, certification of its tax-exempt status, a financial audit and a detailed statement setting out its plans for the money. The restrictions were the first ever on a once unrestrained earmark process.
But the council later eased those rules to authorize nonprofits without the required documentation to join with a “fiscal agent,” a certified nonprofit through which the grant money would flow. The purpose was to allow fledgling organizations with a valuable purpose to obtain earmark money.
That decision provided some very good organizations with needed financing, council members say, but it also opened the door to questionable practices.
“We were trying to be as flexible as we possibly could,” said Council Chairman Vincent Gray. “I think it’s always going to come back to the integrity of those involved.”
